Choose the Statement That Is Incorrect

Multiple Choice

Choose the statement that is incorrect.

A) Firms that have a high marginal abatement cost sell pollution permits.
B) A cap is an upper limit.
C) A cap is a pollution quota.
D) A government that uses cap-and-trade must first estimate the efficient quantity of pollution and set the overall cap at that level.
E) The government solves the problem of allocating the cap by making an initial distribution of the cap across firms and allowing them to trade in a market for pollution permits.